MFS to repay debt after selling Stella stake

By Victoria Thieberger

MELBOURNE (Reuters) - Australian financial services firm MFS Ltd MFS.AX said on Monday it will be able to meet a debt repayment deadline thanks to selling a 65 percent stake in its Stella tourism business to private equity firm CVC Asia Pacific.

MFS, the latest Australian casualty of a global credit crunch, said it will receive A$409 million ($372 million) for the stake, more than enough to repay the A$220 million in short-term debt maturing by the end of March.

It also signaled further asset sales as it restructures following the collapse of a A$1.3 billion ($1.15 billion) deal to sell its funds management business.

Shares in MFS have been suspended indefinitely after investors bailed out of the stock on January 18 on concern about the firm's debt levels and financial viability, sending its shares down 70 percent.

"It's a forced sale. This deal, together with the (aged care business) sale last week, more than covers their debt and it provides some additional working capital," said Shaw Stockbroking analyst Brent Mitchell.

The deal will remove some A$905 million of Stella's debt from MFS's balance sheet.

MFS was swept up in turmoil that hit Australian property groups and smaller financial firms after news that shopping mall owner Centro Properties Group (CNP.AX: Quote, Profile, Research, Stock Buzz) had trouble in extending a tight refinancing deadline for A$3.9 billion in debt.

Credit markets have dried up for many of these firms in the fallout from the U.S. subprime mortgage crisis.